MilesDependent

I basically have 1 question for you folks:

Will people (yourself included) fly the new Ansett (ANIII)?

I've pretty much gone through what I know about ANIII, and thought about how it could possibly compete with QF and DJ.

I certainly do not profess to know everything about ANIII, so please feel free to point out anything I have missed. And if anyone has got any other ideas about how this ANIII will work (either extensions of what I say, or completely different) please let them loose.

As this is not a a particularly active forum on FlyerTalk anymore I will cross-post my article to two other sites on the net. If anything interestings pops up, I'll be sure to post a link. However, I think what we do have here at FlyerTalk is a good collection of occasional and serious domestic flyers. And I am very curious to get your thoughts about the new Ansett.

So on with the show ..... will people fly ANIII?

This depends on what AN will be offering.
I am quite confident they will offer the following, (of which much has been confirmed, or strongly hinted at).
1) Full Star Alliance membership, with grandfathering of original *S and *G from the old AN.
2) Brand new fleet of A319/320/321 aircraft after 12 months.
3) PTVs in all classes.
4) A frequent flyer program linked into the other star carriers, and also linked back into Diners (with 1.5pts MD guess) and one or two other credit cards (presumably Westpac).
5) Comprehensive route network to most of the places you are going to want to fly.
6) Full Golden Wing club for GW members and *G customer.

Then we have the unknowns:
1) Pre-existing points/miles balance from the old AN FF program.
2) The 'ins' and 'outs' of the FF program. By that I mean, upgrades, point earning and redemption, elite status: Star Silver and Gold.

The MilesDependent View:
1)Leisure customers - Miles Lost from Old Program. ANIII must reinstate people's pre-existing points balance in an economical manner. So, how can this be done?

One idea floating round my mind is that people earn double or triple points on AN flights, to the extent of their pre-existing balance. By way of example (using triple miles):
Assume I had 20,000 miles which I lost on the old Ansett. I would need to fly 10,000 miles on the new AN to get back my original 20,000 miles:
10,000 flight miles flown; plus
20,000 additional/bonus miles (equal to my old AN point balance).
TOTAL MILES ADDED TO NEW AN FF ACCOUNT = 30,000 (ie, triple miles, and I've now got back all the miles I lost in the old program). Customers will want to get back their old FF miles, and at the same time they will get used to flying AN again.

2)Bankruptcy - again. Corporates fear that AN will go bust again and throw scheduled meetings into chaos. The leisure customer's biggest worry (and hence reason for not using AN) will be that they will go broke and points will be, again, lost.

I feel this has been dealt with effectively with the announcement of the RyanAir etc. backers. There is now a very strong board behind ANIII which will give it every chance to suceed. But yes, people will always have in the back of their mind "what if they go broke". Yet, people will not have this perception of QF.

3)PTVs. I must say I do not understand the long-term logic of installing PTVs on the planes (subject to my comments towards the end of this e-mail). In the short-term I imagine this will be a good marketing point, as it is something new to the domestic aviation market, and people will want to "check it out".

Which customer segment do Ansett need to attract if the airline is to be successful?Corporates (because they are the ones who purchase the expensive tickets). Which cities do the bulk of corporates fly between? SYD/MEL/BNE. Is the average corporate going to be interested in watching one of these contraptions on a 1-2 hour flight? No. These customers are content to read, watch the news on the main screen, or work. Will AN be in a position to 'woo' the lucrative corporates back to their planes with their PTVs? Not on that one basis.

So, who do PTVs typically appeal to? Leisure travellers. Does the average leisure traveller care about a PTV on a 1-2 hour flight? On the basis of the success of JetBlue in the United States, I would say 'to some degree', however no more so than FF points and total dollar outlay.

With the Australian aviation market as competitive as it is, particularly with the very low cost structure introduced to the industry by Virgin Blue, I just do not see the need to spend what must be significant amounts of money on PTVs for these short flights. AN wants the corporate customers. PTVs might grab a few leisure customers across from QF and DJ, but at the same time it must inflate AN's cost structure.

Furthermore, there is no time to watch a movie or anything meaningful on these short 1hr flights. By the time the snack and drink is served, is there really any time to watch X+ channels of entertainment?

Then we have the 3-4 hour cross-country flights, which is a different matter. On these flights I believe PTVs will be looked upon favourably by both corporate and leisure travellers in the long term (ie, not just a start-up gimmick which people want to "check out"). However, I would be curious to see what % of total revenue is generated by these >3hr flights. Could it be an option to fit X% of aircraft with PTVs, and utilise these a/c on the >3hr flights. A marketing campaign could be developed to reflect this. For example, on AN flights from SYD to PER you have a choice of 10 movies and 10 entertainment channels on your personal TV screen, compared to the overhead screen on QF, and the uhh.... uhhh.... ummm.... on DJ..

I am not at all familiar with the cost of implementing PTVs in aircrafts, however logic tells me that it must be expensive. The comments in the paragraphs above reflect this assumption.

4) Economy Plus Seating. I have not recently heard any mention of AN introducing this product. In my opinion it will be a big mistake if they do not do this.

Let's review their target market: corporates. These are people who fly a lot on full fare tickets, often have elite FF status, and spend many hours per week flying back and forth between MEL/BNE/ADL/SYD/PER. These are people who buy the refundable, changeable tickets which cost more and make Ansett more money. These are the people who MUST come back to Ansett.

So what does (or did) Ansett provide for these high revenue generating passengers?

Most (bordering on all) of these people would be provided with a Golden Wing membership by their employer. Therefore they already have the benefit of priority check-in, priority baggage, and the GW lounge. A large number of these people would also be 'elite' frequent flyers and would obtain more FF points through status, the benefits of the priority waitlist and phone line, the very seldom operational upgrade for Star Gold members, and not much else. With the exception of the operational upgrade (which are so few and far between anyway), you will note that these benefits are all restricted to the ground. Qantas is in the same boat here. AN should look at providing benefits to these high revenue passengers when they are actually in the air. That is what they are paying for after all.

Next, consider the trend of most companies sending their employees around Australia in economy class. What is the most common gripe heard by passengers who fly in economy class? Room aka seat pitch.

AN should provide their full fare passengers and elite frequent flyers with an economy plus section at the forward section of the economy cabin. This section should have approximately 4-5" of extra legroom. This would would involve removing approximately 2 rows of seats from the aircraft.

This is by no means a new initiative from an international standpoint. Notably United Airlines introduced Economy Plus 5-6 years ago and I understand this has been a very successful initiative with business passengers. The UA model does not provide a seperate cabin for their Y+ passengers, it is just tacked onto the front of the Y cabin. It is interesting to note that other airlines such as SAS and BMI have also recently introduced this initiative.

With regard to AN Y+, I would recommend going one step beyond the UA model, and maintain the Y+ as a separate cabin (lav and galley locations permitting). This way AN would be showing its premium customers just how important they are to the airline. And if there is one thing I can guarantee you, anyone who flies regularly in economy would kill for another 4-5" of legroom.

Interestingly, I have noticed a trend among Star Carriers (SK and BD) to introduce economy plus, so I sincerely hope to see AN a firm part of this trend.

***** A POSSIBLE FUTURE FOR THE NEW ANSETT *****

I will quite clearly contradict some of my earlier comments here by summing up a possible future for AN, with what I know they are doing, and what I think they should do in addition to this.

It's worth remembering that AN are going head-to-head with QF for the $$$ corporate customers, and are in a position where they *should have* significantly reduced their cost structure. QF was a government organisation and would have been markedly inefficient prior to its float. While QF is no doubt becoming a more dynamic and cost-focused organisation each day (particularly with the new leadership) it must be still over-staffed. Nothing can shake up the cost structure of an organisation more than what AN has gone through. On this basis I would say that AN should be in a position to provide what I outline below at a cost not amazingly higher than QF's existing cost structure. If AN yield's were equal to those at QF, I believe AN could provide these products, have an end-pricing structure identical to QF, and generate a similar profit.

Become the premier airline in Australia.
It is no secret that QF has significantly cut costs in recent years in an effort to keep costs down and survive the price wars with CompassI/II, Ansett Impulse, and Virgin Blue. Mmany of which are visible to customers and include catering and slimline seats to be installed in he 737s. QF domestic was once a ‘full frills’ airline but they have become increasingly concerned with cost-cutting and its domestic service is now somewhere between a ‘full frills’ and a ‘no frills’ airline. Yes, it's better than in the US, but poor compared with almost all Asian airlines and many European airlines.

There may be an opportunity for AN to establish itself as the 'full frills' business and leisure carrier by integrating the various points below into the new airline. They may be able to push QF (to some extent) into no-mans land. AN may be able to snare a sizeable portion of the business/corporate market through offering various products and services which QF cannot currently economically deliver, given their comparatively bloated cost structure. There is no way known to man that QF could ultimately win a war with Virgin Blue given the new entrant’s extremely low cost structure. Therefore, the ‘new lean’ AN could snare a sizeable % of the high-end market from QF by offering passengers an overall ‘better’ product, and DJ could snare the low-end market through maintaining its low cost structure.

1)Introduce the economy plus seating (as discussed above) and demonstrate that they really do look after corporate customers and elite FFs. The extra room also enables one to work more effectively in-flight (ie, easier to write notes or use a notebook PC). Critical.

2)Seat pitch in standard economy and business should be 1-2" more than on QF.

3)Operate a business class cabin across all flights (confirmed). Even though many corporates will not fly their employees in business class, the presence of a sophisticated business class gels with the 'full frills' airline which AN should strive to be. QF have confirmed that their 733/4/8 fleet will be heading to an all Y slimline configuration. Contrary to their press releases, I can guarantee you that these aircraft will operate on the SYD-MEL/ADL/BNE, MEL-ADL/BNE.

4)Install PTVs in each and every seat across the network.

5)Develop in-flight catering like it used to be. Remember the great lunches and rather substantial snacks QF and AN offered all those years ago? The new AN should offer customers a can of coke and don't make them feel like a criminal when they dare request something besides the OJ (ala QF).

6)Keep to your word about operating brand new Airbus jets, and replacing them every 2-3 years. The premier airline in Australia with the most modern fleet of jets in the sky. This one's straight out of SQ's book.

7)More check-in counters - less queues. A 'full frills' airlines doesn't make its customers wait for 30 mins like has happened to me on the old AN and QF. Of cause queues are always going to exist, but they could improve matters in this regard. Clearly this is not a 'sure seller' on its own, but it contributes to the airline's image and would certainly be a player for the business customer who is not GW or *G and is sick to high heaven of waiting in check-in queues - particularly at 7-8am in the morning.

Marketing
This is what is boils down to in my opinion:

Australia's Premier Airline ...
...for all the reasons mentioned above. Yes the new AN may charge a more, but it provides its customers with a lot more.

A interesting marketing ploy would be to compare the services of both QF and DJ against the Premier Airline, and not realy differentiate between QF and DJ. It would damage QF's position as the number one carrier in Australia if they were to be lumped together with DJ (although it is certainly not true that QF is a no frills carrier). The end result could be along the lines of "QF and DJ provide their poor seat pitch, lunch boxes or no meals at all, no TV screens, no separate sections for FFs... and then there is AN, the Premier Australian Airline.

A key marketing focus for companies with Australian operations is that the new Ansett is 100% Australian owned (whereas DJ and QF are not). I believe the marketing should be targeted at several segments per the following:

1) The ‘middle+ class leisure traveller'. These are the people who fly SQ to Europe because they are perceived to be a better airline. The Australian owned factor may come into this (yes, this contradicts my SQ analogy but the majority of Australians will buy oz-owned only if the oz product is better or equal).

2) Close to 100% of the 'prestigious' corporate, banking and consulting companies. Big dollars here.

Now, I know these companies first-hand and they do have an 'image is everything' culture, although certainly nowhere near to the extent as they once did. These obviously include firms such as Boston Consulting Group, Mckinsey & Company, Accenture, Andersen, PWC, Macquarie Bank, JP Morgan, CS First Boston, ABN Amro and the other US/European (possibly Asian) investment banks, Mallesons, Blakes and the other top 15-20 law firms, Grant Samuel, Babcock & Brown, the Japanese finance and leasing houses, the other many boutique financial services firms which employees all around Australia, and corporates such as News Corp etc..

It may sound 'simplistic' but these companies spend big dollars renting out prestigious office space, and if there is not 'much' in it from a $$$ perspective, I believe they would choose to have their employees fly on the more prestigious airline in Australia. These corporates do not send their junior-mid employees business class because the cost differential is too high, the premier Ansett cost differential would not be in the same ball park. As a little evidence of the corporate way of thinking, how many of these type of companies send their employees on Virgin Blue?

I believe if they could crack this market AN would be well on their way. Critical to emphasise that the new AN is focused on its business customers, through the economy plus seating/cabin, and the ability to actually get work done in the economy cabin.

3) As many of the more conservative (not necessarily completely penny-pinching companies) as possible including Telstra, Coles Myer, AMP, the 4 banks, Boral, IBM etc. I think the Australian owned and providing a better product would have to come through here. Plus the business focus once again, more room, work on planes.

4) Sporting teams - AFL, ARL, ACB. People have always associated these with Ansett, and it really is great publicity. But let's focus on more 'classy' adds (I'm sure many Australian cricket watchers will remember fine adds with cricket balls being thrown down aisles).

International Issues
When approaching corporates to devise exclusive agreements with AN, an important issue arises as to whether AN can compete with the international deals QF can develop. In this regard, I firmly believe AN should focus on the benfits the Star Alliance network can provide. Ideally, a Star world-wide agreement could be devised for Australian originating traffic, as discussed below.

So where do most corporates send their Australian based executives? Asia, Europe and USA.

ASIA, EUROPE: Singapore Airlines (“SQ”) are regarded as one of the world’s finest airlines, and this coincides with pushing AN as the premium Australian carrier. SQ offer exceptional connections through to Europe, and right through Asia. From an Asian standpoint, the disadvantage is the lack of non-stop flights. However, SQ can get you virtually anywhere to Asia same day except Japan/Sth Korea. Also of importance, SQ are regarded as having one of the most modern fleets in the world (as will ANIII).

USA: I would be pushing the UA Economy Plus seating available for corporates and elite FFs, which coincides with the product AN should introduce. I do not believe there is much of a difference between QF and UA except for this Y+ seating.

Agreements should also be reached across the entire Star network. I am not aware of OneWorld (or Star at this point in time) approaching corporates with regard to their multi-airline networks. Most large Australian based companies seem to have in place an agreement with QF or AN (until recently). So getting off the track a bit, this could be an area Star push into on a world-wide level.


***** SUMMARY *****

[1. Rewrite parts to make clearer, and UBB]
[2. Edited for grammar and spelling, and rewrite to make a few things clearer]

[This message has been edited by MilesDependent (edited 01-01-2002).]


[This message has been edited by MilesDependent (edited 01-01-2002).]